June of 1944

This week we are celebrating the 60th anniversary of perhaps the
seminal event of the 20th century, the invasion of the beaches of
Normandy leading to the eventual defeat of fascism. Many consider it
our nation's finest hour and a testament to America's supreme sacrifice
in defense of freedom.

On June 22nd we will also celebrate the 60th anniversary of
the passage of the GI Bill, one of the most important pieces of
legislation in U.S. history. The GI Bill was in place from 1944 through
1960. Approximately 2.2 million veterans (one-third of all veterans
returning from WWII) entered the thousands of U.S. colleges and
universities in the 16 years following the war.

The result was broadened access to higher education services
and a change in the structure of the higher education system. After the
GI Bill was introduced, the mean number of colleges established every
year rose consistently year after year, as did enrollment.

The synchronicity of these events is rather impressive. Almost
simultaneously, "guns and butter" were put to work. From then on, our
nation, indeed the world, experienced an unprecedented time of growth
and innovation, powered by millions of highly educated Americans, eager
to attain the American dream.

Productivity, that ultimate source of economic growth, has a
source itself: the education of our human capital. The best investment
advice one can give young Americans is to invest in their education.
Over the second half of the 20th century, as our economy became
hungrier for higher-level skills, the high school diploma became less
and less of an entry ticket into our economic playground. Currently,
high school graduates will earn 60% of the median income of graduates
holding a bachelor's degree and only one-third of the income of holders
of professional degrees. In a knowledge-based society, those who don't
attain knowledge also don't attain a decent standard of living.

The linkage of education and economic development is not just
a U.S. phenomenon, but a global one. Thirty-year trend studies by the
World Bank on the differences in economic growth of countries that
began as roughly similar in economic size point to almost two-thirds of
that difference being driven by knowledge attainment (e.g., Ghana and
South Korea). This should become one of the cardinal rules of economic
growth: the relative speed of knowledge attainment will drive
two-thirds of the relative speed of economic growth. That is how
important it is.

The Largest Investment on Earth

Education is the second-largest industry in the U.S. (healthcare
being number one), and given its nature, the largest investment. The
same can be said globally.

U.S. educational expenditures for primary through tertiary
education amount to over 3/4 of a trillion (!) dollars annually, with
the world as a whole spending a little over $2 trillion. In that
comparison alone, we can see how much more the U.S. is spending on
education than is any other country. On an annual basis, our
educational spending exceeds the entire GNP of any country save five:
Japan, Germany, France, Italy and the U.K..

However, for all of this money, the U.S. education system has been at best stagnant, if not in relative decline.

When U.S. math and science achievements are compared with those
of 41 other countries at the 4th, 8th and 10th grade levels, results
show superior initial rankings rapidly giving way to parity and
eventually to sub-par performance. Test results show the U.S.
performing well in 4th grade achievement, holding a 95% ranking out of
41 countries taking TIMMS tests for science, and an 80% ranking for
math. Tests for 8th grade achievement drop U.S. rankings to 55% in
science and 45% in math. By 10th grade, the U.S. scores dip to a
stunning 10% ranking in both science and math!

Furthermore, the Organization of Economic Cooperation and
Development has reported that over the last 10 years, the U.S. has lost
its leading position in terms of college-attendance rates. Since 1994,
the U.S. has slipped from first in college attainment (graduation rates
of those age 25-34) to second, behind Norway. More important, every
country in the study made progress in increasing college attainment
rates for the current generation versus the last... except the United
States, which made none.

It is hard to escape the fact that the largest investment on
earth - indeed, the largest investment in the history of investing - is
beginning to look like the largest non-performing investment in the
history of investing....

Before we discuss potential solutions, it is important to
consider that while the international comparisons are sobering, the
intra-U.S. trends are perhaps even more alarming.

An increasing body of evidence shows a rapidly stratifying
American society defining itself along very distinct lines of
educational attainment. In short, the multiplying effects of
educational attainment are dramatic when applied to income groups.
Consider that 76% of 8th graders with family incomes of greater than
$75,000 will attain a higher education degree, while only 43% percent
of those 8th graders with family incomes of $25,000 to $74,000 share
the same educational characteristic. Depressingly, only 19% of 8th
graders with family incomes of less than $25,000 will attain any form
of higher education.

This "attainment gap," which is also becoming manifest along
racial and ethnic lines, has been steadily increasing over the past 20
years. In an economy that is driven by knowledge attainment, we are
witnessing the creation of two Americas: a well-educated America which
increasingly holds the tickets to economic prosperity, and a second
America for which prosperity is inaccessible. Indeed, increasingly, in
modern knowledge-based societies the rate of social friction and the
resultant costs will be directly driven by the rate of the growth of
the educational attainment gap. A recent U.N. study on the stagnation
of Arab societies identified educational attainment, along with lack of
political expression, as one of the top causes, proving the global
application of such a trend.

Recently, the comparative decline of American educational
performance has received a somewhat nationalistic - one might say even
militaristic - flavor, as illustrated by these comments from
Christopher Cross, former President of the Council for Basic Education
and former Assistant Secretary for Educational Research and
Improvement:

"... China graduates 40 million people a year from college. In
India the figures are similar. The United States graduates about 2.2
million.

India and China are clearly intent on using education as a
"soft" weapon against the United States. We will never see an
explosion, we will never be able to trace fissionable materials, we
will never discover germ factories. The "secret factories" are out in
the open and called schools, technical colleges and universities.

Their goal is to produce legions of people with degrees, who
can encircle our meager forces in another few decades, consigning the
U.S. economy to the second tier, and with it, the standard of living of
our children and grandchildren.

Our only effective defense is to greatly improve the quality and productivity of our own education system."

We must resist the temptation of merging the Department of
Education with the Pentagon, particularly during these current
troubling times, when the U.S. education system is less accessible to
foreign students.

It is in America's interest to promote a more educated world.
Educated democracies are our best hope for a peaceful world. And, as
Mr. Cross correctly points out, educational quality and productivity
will be the new benchmark for relative economic growth.

Entering the Tunnel

Sadly, these trends have been in existence for some time. Indeed, it
has been more than a decade since the Commission on Excellence in
Education published its famous "A Nation at Risk" report, sounding the
first broad alarm. Before we examine the way out (indeed, there is
one!), let's consider the architecture of the problem.

First, although it is the attainment of higher education that
drives income, the failure to achieve it starts squarely at the K-12
level. The U.S. has the most accessible higher education system in the
world, largely supported by billions of dollars of student aid. Failure
to access it or navigate through it to completion of a degree largely
rests on the performance of our K-12 educational pipeline. Those of us
who have spent a considerable time working with our K-12 system often
joke that it takes five times as long and five times more money to get
things done in education compared with any other industry. The "speed
of molasses" phenomenon can be traced to the following:

Lack of Scale - The U.S. education system consists of a sea of
decision makers: 16,000 school districts, 110,000 schools, 3 million
teachers and tens of thousands of school board members (most viewing
school boards as a first step to a political career) - think of the
factorial! - often not staying long enough to make things happen. It is
not surprising that the average tenure of a school principal is not
much more than 2 years.

The "Problem of One" - K-12 education is offered as a basic
right of every U.S. citizen. Our nation has a strong ethos in providing
every single child access to it. With 50 million kids all coming from
different socioeconomic backgrounds and starting points, the challenge
is enormous. Every child in a classroom has to have the same access to
the same pedagogical tools and processes. A teacher cannot assign a
writing assignment if 99 students out of 100 have a pencil and one does
not.

Zero-Sum Budgets - Long-term educational expenditures don't
grow much more than 4% to 5% a year. 80% of the cost is labor (teacher
salaries). Most of the growth is provided by special initiatives from
the federal government or the states, while teacher salaries try to
keep up with inflation. For programs not covered by specially allocated
funds, any shift in spending has to come from another pocket in the
system. Usually this means reducing jobs or pay for teachers, delaying
building programs, or paring or eliminating libraries. I wouldn't want
to be a school board member trying a new initiative on the backs of
these constituencies.

Lack of Accountability - In some respects, lack of
accountability is a direct result of the lack of scale. While
management's half life is less than two years (boards, principals,
superintendents), labor representation tends to be permanent. It is not
surprising that labor representation has sought and gained strong (some
argue too strong) job protections for its membership in a world where
"management" is constantly changing and where the academic and
political debates of what constitutes effective pedagogy are without
end.

Rules of the Road

Given this system architecture, consider the following as rules of engagement, or guideposts of a successful solution:

Any successful solution must cover everyone.

Any successful solution will require sustained systemic investment.

Any successful solution will require incremental investment in the short term in order to avoid the zero-sum game dynamics.

No local or even single state solution will change the system, no matter how successful it is.

It is fair to say that the above rules apply on the assumption that
one cannot change the basic architecture of our education system.
Although that would be theoretically possible (e.g., national
curriculum, etc.), it is practically unattainable. We have to work
within the current box if we want to get results.

The Efforts to Date

It is also fair to say that our nation's government has made efforts
to meet the challenge. After all, politicians must respond: education
is consistently one of the top three concerns of voters for as many
years as we have been able to track voter expectations. The Clinton and
Bush administrations have each initiated and enacted educational
legislation whose scope has not been seen for 30 years. During the
'90s, E-Rate legislation (further described below) amounted to almost
$40 billion of investment in wiring our nation's schools, while No
Child Left Behind (NCLB) is currently profoundly addressing educational
accountability.

America hasn't seen this kind of universal educational
legislation since the GI Bill. Even major legislations such as Title I
or the Individuals Disabilities Education Act (IDEA) - providing funds
for low-income and disabled kids, respectively - affected only parts of
the educational population, not the entire population.

Both E-Rate and NCLB have been partly successful, but sadly,
they have yet to change our performance trajectory. Both are systemic
in nature, as they are federal programs and hence applied throughout
the nation (Rule #4). Applying the rest of the model rules we can see
why they have stumbled:

NCLB

This legislation strikes at the heart of the accountability
challenge. To be accountable requires a means of measurement.. That
observation has led to a massive effort to test every child in America,
several times. Once a school is deemed to be failing, it can ultimately
be closed. This ultimate "death penalty" has applied significant
pressure to the system and has focused the mind of all decision makers.
That is good.

The legislation is also focused on every child (Rule #1), and hence has the necessary systemic scope to make a difference.

However, sustained investment appears to be lagging. The initial
decision was far-reaching and noble, but once the legislation was
passed ("the day after," so to speak), the states faced a chaotic set
of requirements, all of which have led to the gradual emergence of
significant costs. Although the government has provided funds for
teacher training, state testing and tutoring (Rule #2), the funding is
either too complex to reach the schools or is simply not adequate. In a
world of zero-sum budget, the absence of incremental funds (Rule #3)
ignites every constituency's defensive posture, and it just becomes
political quicksand.

E-Rate

The Clinton administration's massive investment in wiring our
schools has largely met its specific goals. Currently, almost all
schools and increasingly all classrooms have been wired for broadband
access to the Internet. It is gratifying to witness the success of a
program once our government focuses on it. This has all happened within
the past seven years, and it has transformed the technology
infrastructure of the school system. The federal government largely
provided all the funds (and as such, incremental to existing budgets),
and the schools have responded (Rule #3).

E-Rate's promise was a simple one: technology has transformed
and has largely improved every other aspect of our economy.
Furthermore, the Internet is by definition a knowledge-attaining,
collaborative medium. Tim DiScipio's recent SNS Special Letter on
collaborative technologies in schools proved this point aptly.

However, E-Rate's ultimate promise has yet to be fulfilled.
Bottom line: performance did not increase. Following the fanfare (and
the federal dollars), school districts still have to maintain access to
the Web without any tangible systemic evidence that it is worth much.

E-Rate provided funds for wiring and network build-up but not
enough for teacher training, maintenance and pedagogy (Rule #2). What
good is a network if there is a dearth of good proven content, or when
five kids have to huddle over a single computer in the back of the
class to access it? E-Rate was a 5,000-foot solution. It did not reach
every kid. It is a network effectively without nodes. It violated Rule
#1.

Exiting the Tunnel

We don't need to re-invent everything all the time. Actually, both
NCLB and E-Rate represent powerful electrical shocks to the body of the
U.S. education system. And given the massiveness of the edifice, it is
always tempting to abandon what we started and chase another
"transforming" idea. Education will be changed by building upon
hard-earned progress and the billions already invested. We are in the
midst of crossing the chasm.

While NCLB is in the midst of its rollout, and while the
political debate is raging around its level of funding (which is a step
forward, as most continue to support its central accountability
tenets), the great technological leap forward is in danger of stalling
and fizzling. Technology companies are rushing to provide technological
infrastructures to manage data and deliver tests (both worthwhile
activities and markets), but such an effort is relegating technology to
a supporting and derivative status, displacing it from the core of the
pedagogical process.

The debate about the lack of results given the investment in
establishing universal school and classroom broadband access is
centered around the lack of content, insufficient teacher training,
lack of maintenance funds and a general lack of innovation when it
comes to technology-enhanced pedagogy, particularly the reluctance of
educators to use technology. But these are all somewhat superficial and
secondary arguments, when one considers that:

There is a plethora of ideas on how to solve specific
educational challenges, from privacy issues to security, training,
communications, data management, etc. Several billions of venture
dollars have already been invested in innovative education technology
companies.

Although somewhat slow to adopt, most teachers are either
comfortable with their usage of technology or are open to training.
Continued training is necessary, and the foundation has already been
created.

The great success of higher education distance learning
demonstrates that technology can indeed be used to deliver a better
high-quality educational experience.

Content publishers spend over $1 billion annually on
developing content for school textbooks and ancillaries. Most major
education textbook companies are themselves divisions of integrated
professional content conglomerates that have made the transition to
electronic content successfully in several other divisions. There is no
doubt that the movement to electronic content represents a major
opportunity for textbook publishers to increase their growth and
profitability. But in order to make the transition, they need to be
convinced that the book platform is a relic of the past. They are not
quite convinced of that as of yet.

Kids, as Marc Prensky has pointed out to us in SNS and at
FiRe, are already digital natives, comfortable with and attracted to
technology.

E-Rate built the equivalent of the "interstate highway system,"
linking our education system to the Web. We certainly have plenty of
ready "drivers," as increasingly teachers and kids are prepared to
enter the information highway, while the content companies certainly
have the wherewithal to provide all with the "fuel" of content. We have
all of the elements in place except the "cars." Currently the U.S.
ratio of computers to kids stands at 1:5, and such ratio is considered
one of the best in the world. But imagine a 1:5 ratio of textbooks to
kids. At that ratio I am not sure that the textbook would have been
much of an effective educational tool either.

One-to-One

So much of the technology revolution has been fueled by
collaboration, connectivity and network effects. White-collar
productivity gains didn't hit the power curve until penetration in the
workspace (indeed, even at home) reached, and in some cases exceeded,
1:1 ratios of white-collar professionals to computers. As computing
power has become more and more portable, the computer has become a
permanent, conjoint feature of work. It is hard to believe that we
could actually accomplish much anymore without access to a PC or
equivalent device.

In education, the first beachhead of 1:1 computing has been
the higher education system. The first manifestation of 1:1 results has
been a massive increase in distance learning, as working adults are
finding that freed from the restrictions of time and space they can
pursue higher learning tailored to their lifestyles. Initial fears of
potentially lower-quality learning are being allayed as more and more
universities (including some of the most prestigious ones) are
incorporating distance or blended learning as part of their core
pedagogical offerings. New forms of pedagogical tools (such as
sophisticated simulations) are actually improving classroom teaching
(think of flight simulators).

In the K-12 space, 1:1 pilots in specific school districts,
such as Lemon Grove in San Diego County, and even in states (e.g.,
Angus King's initiative in Maine), are demonstrating measurable and
meaningful increases in pedagogical outcomes as every child in a
certain grade, school, or school district has access to a wireless
computer environment, often both at the classroom and at home.

These pilots are also providing all of us with knowledge about
the overall ecology of 1:1 computing in schools, including requirements
for support, training and content applications. They also demonstrate
the intense commitment by educators, students and parents to 1:1
computing once the fruits of its success are tasted. Nothing inspires
change more than success.

We are starting to accumulate powerful insights about outcomes
and implementation guidelines. Most important, we are learning that we
must not fall into the trap of thinking we must design the perfect
system in order to begin. There are several outstanding questions
around specific pedagogical content, teacher training and change
management processes - but none of that has a chance of success unless
every child has equal access to a computer on a 1:1 basis. They first
need cars in order to learn how to drive.

The Design Points

Our successes and failures to date point to the following broad design points of a 1:1 educational world.

Cadillac, not Chevy

There is always a temptation to cut corners in order to cut
costs. But we must not make the mistake of cutting the functionality of
the device to the point that it does not deliver a successful or
needs-appropriate experience. Small black-and-white screens,
insufficient battery power, unwieldy and unfamiliar keyboards, poor
support and superficial training are just a few of the compromises we
have made in the misguided effort to have our cake and eat it too. I
submit that lowering functionality and broadly defined system
reliability serve only to increase rather than decrease overall costs,
as insufficient products are ultimately discarded.

Network access all the time, everywhere

Pupils don't leave their textbooks in the classroom. Kids don't
study just in the school. Experiences with 1:1 computing are starting
to show (despite earlier fears) that once kids acquire a sense of
personal ownership of their laptops, they actually take better care of
them than even the most optimistic forecasts projected. If we think
that allowing students to take their laptops home makes the machines
more vulnerable to damage, figures from Maine offer convincing evidence
to the contrary. It is an empowering relationship, and it is personal.
It is theirs.

Network access at home also requires the extension of E-Rate
connectivity to the household, which can present perhaps the single
biggest challenge to 1:1 computing. However, innovative schemes are
being implemented (including the participation of cable and telephone
companies, in San Diego), accelerating the rollout of broadband to all
student households and diminishing costs to the states and federal
government. Education is a killer app for broadband connectivity.

Familiarity of devices

Two decades of knowledge show how consumers and kids are using
computing devices and what types of devices they are comfortable with.
We live in a world that has already distilled several user behaviors
into common denominator form factors, that do not require most users
(teachers and kids alike) to learn brand-new tricks.

SNS Project Inkwell, for example, founded by Mark Anderson
(disclosure: I am an advisor), is engaged in an ambitious effort to
aggregate and summarize the basic standards around 1:1 computing so
that the technology industry can design products that appropriately and
equitably fulfill the needs of the school environment.

E-Rate II (The Sequel)

Sooner or later it all comes down to money.

We are talking about the kind of money that only exists within
the power of a national government. Even though 93 cents out of every
educational dollar is spent by local and state authorities, every
single large-scale U.S. educational initiative has required federal and
presidential leadership. Consistent with the rules of engagement
described above, only the federal government can be the catalyst that
turns the proverbial dial.

Currently, the U.S. is spending a rather meager $40
(approximately) per kid per year on computing. Even if such devices
were to last four to five years, the average amount spent right now per
device is no more than $200. It is our estimate that the kind of
computing capability that is required is in the range of about $1,000
per pupil.

Simple algebra determines the level of funding required:

29-30 million kids (grades 5-12)

Current amount spent on computing for grades 5-12 is roughly $1 billion

Ballpark current cost per kid for an appropriate networked product: about $1,000

Assuming that the devices last at least three years (and there
is good evidence that this is highly possible), cost will be about $10
billion per year

Adding roughly 20% of training and incentive systems puts us at about $12 billion per year for 1:1 computing

The gap is in the range of $11 billion per year. That is only about
3% of our current overall educational expenditures. It would still
leave IT spent for education as a percent of total costs, less than in
many other industries, particularly those that are knowledge-based.

Is $11 billion affordable? Is our ability to begin to have a
high-performing education system a large economic opportunity? My
answer to both questions is a resounding yes. There are few areas that
we can invest in that will as directly ensure the long-term growth of
our nation.

In the end, $11 billion is of course a substantial figure; and
frankly, it represents the outer bound. In order for action to take
place, the IT industry as a whole will have to decrease the total cost
while maintaining and even increasing functionality by using the
economies of scale that such new demand creates.

IT Industry Leadership Required

The approach of the IT industry to K-12 education has been rather
disappointing and has lacked a coherent vision. In general, the major
companies have failed to see education as much more than another sales
channel, potentially a difficult and less profitable one, given the
complexity of the sales cycle and the inevitable price discounts.
Despite the business challenges, and the lackluster demand to date,
most are comforted by the belief that even if the profits are not all
that exciting, at least the kids' experience with their products will
lead to potential future adult users. Most have also set up nonprofit
initiatives to provide access to their products and services, largely
out of a sincere desire to help. But all of these good intentions are
not enough to change the system.

Technology leaders must recognize, if not the potential for a
wider societal impact of improved education via technology, then
certainly the tremendous business opportunity that technology holds.
However, unlike markets in which competitors respond to market demand,
the technology industry must work to help create and shape this demand.
The potential creation of billions of dollars in demand for new systems
in the U.S. and eventually abroad (e.g., last year's German education
ministry's multibillion-dollar order) represents one of the few new
large-scale markets for the global PC hardware and software industries.

If indeed a new E-Rate II program is to take shape, leading IT
CEOs must play a direct and even a personal role. The industry must
take steps toward creating educationally focused products and managing
costs at scale. How much can we drive the cost of a $1,000 computer
while maintaining appropriate functionality? What are the economies of
scale? Can there be agreement on some common minimum standards?

Having done our share of the bargain, we can then work with
the federal government (and it must be the federal government) to
support the grand roll-out. A grand bargain indeed.

The New Education Century

Sixty years after Normandy and the GI Bill, we are again faced with
a very similar circumstance: a global war and demands to prepare our
workforce for a new kind of economy. Our nation once again requires our
leaders' imagination, commitment and determination.

American voters have consistently voiced their desire to
improve the performance of their educational investment and arrest the
slow but persistent decline of our most fundamental productivity
engine. Technology has yet to make a meaningful difference, but it is
tantalizingly close to doing so. Let's not delay further. Let us
remember the start of this new century not just in terms of a war on
terror, but also as the time of reinvesting in our future - just as we
did in June of 1944.

Copyright 2004 by Kosmo Kalliarekos.

About Kosmo Kalliarekos

Kosmo Kalliarekos is a founding member and senior partner with
The Parthenon Group, a strategic advisory boutique consisting of 150
members located in Boston, London, and San Francisco. At Parthenon,
Kosmo heads the firm's Education Industry Center of Excellence. For
over 15 years, Kosmo has advised clients on issues related to
operational excellence, extensive corporate strategy development, and
new venture creation. Parthenon's client relationships span several
industries, including consumer products, financial services,
information publishing, and educational publishing, technology, and
services. Kosmo's clients include a wide range of organizations, from
startups to Fortune 100 companies. Kosmo has been a featured speaker on
issues relating to the education industry at several forums, including
the Congressional Joint Committee on Education, the World Bank, and the
American Association of Publishers, among others. Kosmo graduated from
the Wharton School of Business at the University of Pennsylvania and
received an MBA with High Distinction, from Harvard Business School. He
is also on the steering committee for Project Inkwell, developing the
business model and economics of 1-to-1 computing in grades K-12.